MSMEs in waste management find a savior; this Singapore investor to back ideas in plastic pollution

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Published: May 6, 2020 8:10:06 PM

Credit and Finance for MSMEs: According to the environmental advocacy group, Ocean Conservancy, more than half of all ocean plastic leaks form by just a handful of countries in Asia, including India.

The Circulate Capital Ocean Fund claimed to be the world’s first investment fund for ocean plastic crisis in South and Southeast Asia.

Credit and Finance for MSMEs: MSMEs have been on the front lines of fighting plastic pollution as waste is managed at a local level.  The resilience of waste and recycling systems go hand-in-hand with protecting the health and livelihoods of communities. For MSMEs addressing plastic solution, funding is not easy to obtain as financial institutions may not necessarily understand the sector well enough. This white space has been tapped by impact investment firm Circulate Capital that invests in waste, recycling and circular economy spaces. The fund had last month announced an investment in Mumbai-based plastic recycling firm Lucro Plastecycle. “We aim to demonstrate that investments in the waste management and recycling sector can provide attractive financial returns to illustrate why more investors should deploy capital in the industry,” Rob Kaplan, CEO of Singapore-based Circulate Capital told Financial Express Online.

The Circulate Capital Ocean Fund claimed to be the world’s first investment fund dedicated to the ocean plastic crisis in South and Southeast Asia that unlike regular VCs invest in businesses “that might not IPO but can deliver attractive financial returns” with “a positive impact on the environment and their communities,” Kaplan said. The fund, which has a standard 10-year life, plans to make around 30 debt, equity, or quasi-equity investments between $2 million to $10 million over the next five years.

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The investment firm has so far raised $106 million for the fund and plans to deploy about 20-25 per cent of that in the first year. “We are hopeful that we will have another three-four investments completed by the end of this year,” said Kaplan. The fund is particularly focused on solutions addressing plastic pollution after the point of consumption, including collecting, sorting, recycling, and manufacturing using plastic waste.

The global ocean plastic issue is significant and there is a growing awareness of the crisis that this issue presents. According to the environmental advocacy group, Ocean Conservancy, more than half of all ocean plastic leaks form by just a handful of countries in Asia, including India. “This is why we are focusing our efforts on investing in startups, small and medium-sized businesses or organizations in the waste management and recycling space in South and Southeast Asia,” he added.

While there are some established sectors where equity capital is readily available but in the case of the waste management and recycling sector, funding is almost exclusively available through banks, which need collateral and limits the debt companies can raise. In addition, funding is not easy to obtain as financial institutions may not necessarily understand the sector well enough. These investors also don’t have access to the information and tools they need, such as a visible pipeline or investment track records.

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